French equities now ‘most unloved’ in Europe - BofA survey

France has turned into investors’ most unloved European equity market after President Macron called a snap election, having been the most preferred last month, according to the latest European Fund Manager Survey from Bank of America.

Meanwhile, Spain is the biggest favourite.

The survey found that France has fallen out of favour amid a pro-defensive rotation, with a net 45% of respondents expecting upside for European cyclicals relative to defensives, down from 59% last month.

Tech lost the spot as the largest sector 'overweight' in Europe to healthcare, with insurance still third. Food & beverages saw large cuts to their 'underweight' position, as did telecoms.

BofA said cyclical sectors dominated the lowest ranks, with autos now the least preferred sector.

The survey also found that bullishness on the European macro situation had softened. A net 43% of respondents said they expected stronger European growth over the coming 12 months, down from 61% in May, which was the highest since July 2021.

"While 34% expected an immediate growth acceleration on fading inflation and easing credit conditions last month, only 17% think so now, with their enthusiasm likely tempered by: (a) rising French political and economic policy uncertainty; and (b) a weaker external growth outlook, with 67% expecting the US economy to slow, up from 29% last month, while 29% see scope for China growth to soften, up from 12% last month," BofA said.

A net 6% of respondents expect global growth to weaken in the next 12 months, little changed from May. This keeps the gap between European and global growth expectations unusually wide, BofA said.